China’s Silk Roads in South Asia: Steel in a Silken Glove

Xi Jinping’s ‘one belt, one road’ initiative – representing the Silk Road Economic Belt and the 21st Century Maritime Silk Road – is slowly taking wing in China’s neighbourhood. While India has largely given the cold shoulder to the Chinese moves, its South Asian neighbours have been far more enthusiastic.

A Different Approach

The Chinese have embarked on a path to gaining influence in Asia that is radically different in its approach from the United States. The Silk Roads initiative and the push to set up the Asian Infrastructure Investment Bank represent economic diplomacy, including infrastructure diplomacy, as a means to Beijing gaining political, diplomatic and strategic mileage in its Asian neighbourhood and cementing China’s place at the top of the Asian hierarchy.[1]

In early November 2014, Chinese President Xi Jinping announced that China would set up a US$40 billion Silk Road fund ‘to boost infrastructure and resource development while improving industrial and financial cooperation along the centuries-old Silk Road trading routes’. It is important to note that he made the announcement in a dialogue with leaders from Bangladesh, Cambodia, Laos, Mongolia, Myanmar, Pakistan and Tajikistan and he specifically stated that the goal of the fund was to “break the connectivity bottleneck” in Asia.[2] Chinese policymakers believe that these countries need the infrastructure development and that China benefits from a more prosperous and stable neighboring environment.[3]

The Silk Road fund comes in the wake of the setting up of the US$50 billion Asian Infrastructure Investment Bank that will put in additional money into infrastructure development on the continent. Xi also said China would provide more than 20,000 related training opportunities for neighboring countries in the next five years.[4] India’s South Asian neighbours that have been more receptive to the Silk Roads project can certainly expect to and will want to receive some of this largesse.

‘One Belt, One Road’ in South Asia

China’s ‘one belt, one road’ economic and political project has, in fact, already started work in South Asia. The 2nd Meeting of the China-Pakistan Economic Corridor Joint Working Group on Transport Infrastructure met in Beijing from 20-21 August in preparation for a Joint Coordination Committee later in the month. The emphasis in the Sino-Pak dialogue is on early harvest projects such as the Karakoram Highway, the Karachi-Lahore motorway, and the Gwadar port related projects among others as also capacity-building and training.[5] A November 2014 Reuters report stated that Chinese government and banks had pledged to finance Chinese companies in building US$45.6 billion worth of energy and infrastructure projects in Pakistan over the coming six years.[6]

Speaking to a visiting Pakistan People’s Party delegation led by former Pakistani President, Asif Ali Zardari, Chinese Premier Li Keqiang explicitly drew a link between Pakistan ‘efforts to realize national security, stability and economic development’ and China’s support for ‘deepen[ing] strategic cooperation with Pakistan’ and ‘the construction of the “One Belt and One Road”… to push forward regional economic integration.’[7] In Nepal too, there is an obvious connection between the political and the economic with, for instance, the joint exercises by Nepalese and Chinese armed police forces in mid-November.[8] Nepal, while falling in between the ‘one belt’ and ‘one road’, is nevertheless interested in linking up with and gaining from the rapid physical infrastructure developments taking place across the border in Tibet.

India’s two farthest neighbours in the South Asian region, Afghanistan and the Maldives have both expressed interest in being a part of the initiative,[9] while Sri Lanka has sought to marry its own long-standing ambition of becoming a maritime, commercial, knowledge and energy hub linking Europe and Africa with Asia to China’s Maritime Silk Road (MSR) initiative. Sri Lanka has also suggested that the country’s two international ports and two international airports could immediately be connected to the MSR. The ‘Colombo Port City’ project has already received US$1.4 billion dollars from China in a bid to rival Singapore and Dubai.[10] The appearances of a Chinese submarine in Colombo port for the first time in September 2014 and then again in November 2014[11] also indicate the security imperatives that China is seeking to weave into the MSR. Meanwhile, observers in Bangladesh have also welcomed the MSR with hopes perhaps centering on the revival of Bangladeshi ports.[12]

Alongside, these countries are also by and large buying into the Chinese portrayal of the Silk Roads as ‘a new form of global cooperation’ and innovation[13] and as a source of ‘inclusive growth’.[14] China also quotes approvingly those analysts who believe the Silk Road initiatives are necessary to help solve security problems in Asia[15] which in turn ties in to China’s own description of the Silk Roads as ‘a perfect interpretation of China’s peaceful development.’[16]

Implications for India

Compared to China-Africa trade which stood at US$210 billion in 2013,[17] expanding at an average of 10% per year from 2011 to 2013, and is projected to increase 15-20% per year over the coming five years,[18] China-South Asia trade will not see the same level of increase. China’s trade with South Asia’s largest economy, i.e., India, still stood at under US$70 billion at the end of 2013. It is against this backdrop, that Chinese investments in South Asia and pronouncements on the ‘one belt, one road’ initiative must be seen.

In his only public address during his visit to India, Chinese President Xi Jinping declared that China would invest US$30 billion in South Asia in the next five years,[19] which, if the above Reuters report is true, is less than what Pakistan will be getting over roughly the same period. If Pakistan were to be left out of the equation, South Asia would be getting very little of China’s projected overseas investments of some US$500 billion in the next five-year period.[20] Contrasting the small investment amounts with the high degree of traction that is being provided the Silk Roads discourse in the smaller South Asian nations, it might be surmised that the Chinese see the Silk Roads in South Asia as a primarily political initiative with military/strategic consequences. South Asian economies due to their poor human resources and perhaps, somewhat more democratic and accountable governments than in other parts of the Third World, might not offer Chinese investors the greatest incentives for business-related investments. By contrast, political- and security-related investments in the form of scholarships, political visits, and military exchanges are necessary whether or not China has deep economic ties with this region and possibly offer immediate returns too, given the difficult or fraught ties that most countries in South Asia have with India. Of course, with Pakistan, it is assumed that investments in the economic domain translate easily into still greater political and strategic influence for Beijing.

Thus, both the competitive relationship between India and China – not just in the political and military dimensions, but as will increasingly be the case, in the economic realm – and India’s lack of enthusiasm for the Silk Roads initiative suggest that Chinese investments in South Asia might tread a more complicated path. It could well be the case that the majority of Chinese investments will materialize not in India, South Asia’s largest economy and market, but in other parts of South Asia in the service of Beijing’s political, military and diplomatic goals.